Steve Player interviews Mary Rhinehart, CFO of Johns Manville.

SP: We know that Johns Manville has been working on a finance transformation. Can you take us through what your thoughts were leading into that transformation?

Rhinehart: When we started our transformation in 2004, I had just become CFO. We looked at the whole finance organization, starting with getting the voice of the customer. This was from our employees, our finance employees, our clients, and our key stakeholders, including the business leaders. Some were the outside customers as they touched the JM finance department, such as our credit organizations, as well as Berkshire Hathaway, which is our parent company.

SP: Let me just quickly ask, How is it working for a Berkshire Hathaway company? How is it working for Warren Buffett?

Rhinehart: It's wonderful. You couldn't ask for a better owner. You couldn't ask for a better parent company. I will tell you that no one, especially in times like these, understands economic downturns better than Warren Buffett, and no one stays the course as well. When you read things or when you see Warren speak, what you see is what you get. He is a very smart individual, but he's also someone who's very simple. He looks at the basics and understands the fundamentals.

SP: Remembering the long-term cycle is particularly important in looking at the housing market. With housing starts down, how are you weathering these difficult times?

Rhinehart: It's certainly a tough environment, but it's not the first time we have faced challenges in our 150-year history. We are seeing the softening around the globe now. So what we're really focused on (and what Warren expects us to focus on) are those items that are in our control. We also never lose sight of our customer and the reason that we are in business. It all revolves around the customer. So how can you differentiate yourself? How can you widen the moat (which is something that Warren always asks us to do)? As a result, we've really reduced our discretionary costs, our base costs, which include our fixed costs and our SG&A costs. We're trying to do everything we can to offset and mitigate inflation. Because this environment is not just about the downturn in the housing, it's also about tremendous inflationary pressures. We are constantly seeking cost and usage reductions in our energy, raw materials, and transportation costs.

SP: I notice that you emphasize energy-efficient products. Is this another way to counter, or respond, to customer needs as they try to reduce their costs?

Rhinehart: Absolutely. We look at ourselves as an energy efficiency and energy conservation company. In addition to building insulation and roof insulation, we also make reinforcement products, which are fibers that go into the wind energy markets. These fibers also reinforce plastics to make lighter-weight vehicles, appliances, etc. We are really focused on reducing energy usage. One of our goals is to be a leader in the manufacturing of environmentally responsible building products.

SP: Let's get back to 2004, when you had just become CFO. Did that trigger the beginning of the finance transformation process?

Rhinehart: Yes, it did. As I mentioned, when you come into a new job, it's a perfect time to take a clean slate and get input and feedback. We asked what was working well with the finance organization, what should be changed, what are the expectations of the finance organization, and other questions like that. Working as a finance leadership team, we distilled that information. We also did some benchmarking with the Hackett Group.

We looked at the finance organization from both an efficiency and an effectiveness standpoint. We broadened that beyond just finance. We looked at what we needed to do to become the most efficient and effective organization and what kind of finance organization we wanted to be. For most finance organizations and most functional organizations, the big thing is that they want to be business partners. But an important aspect is what exactly does this mean? For finance, you have to always keep in mind that the fundamentals are very important. You can never lose sight of that. Finance can never lose sight of controllership.

But finance can be much more than that. You truly can and should strive to be business partners, driving business results through tools, through analytics, and through insights. When I'm looking at a business leader, typically the ones with the financial background are very effective business leaders because they understand all aspects of how the different parts of the business integrate and impact the bottom line.

SP: When you started the transformation, what were your customers saying that they wanted finance to be? What were they asking for you to do differently?

Rhinehart: There were several things, but the major thing was to be more forward-focused more future-looking, rather than just historical reporters. And rather than spending so much time just on the transactions or the recording of what happened, they asked us to really take a more strategic role in providing insights into what can we do in the future to drive business results. Some asked for the tools and information that they need to make their business stronger and to make their business more profitable. They wanted help in looking out into where are we taking the business, what we are trying to accomplish and how we can get there. We worked to build financial acumen across the organization -- to have the business leaders ask for the numbers, to have a good pulse on the business-critical thinking, to turn data into information.

SP: So ... much more forward-looking, as opposed to recorder or scorekeeper ...

Rhinehart: That's right.

SP: How did you translate those requests into what your people did and what skills they needed?

Rhinehart: First, we focused on the types of skills necessary. It was a question of whether we have enough analytical and strategic skills. We were very good at handling the transactions. We were good at data mining and really looking at the historical picture. But you also need those individuals who are analytical and who, at the same time, have a more inquisitive nature. You need those who can work with and communicate with people across the business -- not just in financial or accounting types of ways. You need people who can lead up and down and sideways.

And, frankly, you want people who can meet with the customers, the suppliers, and the competitors. You want people who can understand the customers and understand the entire marketplace.

SP: Hearing you say that resonates with what I have heard many CFOs say about transformation, but how do you get your arms around whether people are able to do this? Do you have to replace people? Do you need new training programs? How do you figure out if your people can make the move from what they're doing to what's needed in the future?

Rhinehart: Well, I think that too often companies and leaders look at what they don't have when it comes to skill sets. I think that oftentimes this is a mistake. Another way to look at it is that maybe what you really don't have is the right tools to give to your employees, because some of it is about skills and some of it is about personality. But I will tell you that there is still a need for people with the transactional skill set and the controllership skill set.

But what you need to do is to give the rest of your employees the tools to step it up to the next level. I do believe that with the proper tools and the proper training and development, most employees can get there.

Transformations take a long time. During that time, you will always have a certain amount of attrition anyway. As people leave the organization and as you bring in new talent, this is when you focus on making sure that you have some of those skill sets that you're really looking to bring in and integrate along with the employees whom you already have.

In addition to that, when you go through a transformation (and ours wasn't just in finance -- it started there, but then the whole company was going through business process simplification efforts and ERP implementation to get everybody on the same integrated SAP platform), it can wear people out and it's often frustrating. They would like to have the tools and the systems overnight, but it's a lot of hard work to get there.

While many people are fully dedicated to this process, you also have to have what we call our subject matter experts. Those subject matter experts are doing their day jobs, but they also have to be very involved with and participating in and impacting the whole ERP implementation and business process simplification.

Some people don't have the stomach to see that process through. And that's our constant challenge: How do we keep them motivated? How do we keep them inspired? How do we keep them up so that they recognize that there is a light at the end of the tunnel? We must keep them focused on how the end state will be so much better, so they hang in there with us.

SP: You mentioned a business process simplification effort and an ERP effort. How big a challenge is this on a global scale?

Rhinehart: It's huge. With today's technology, business leaders expect that a fairly simple question should receive an answer with a fairly quick turnaround. Because of our processes and systems, we were finding that this was not the case. We had different processes and different businesses, and we had different charts of accounts, different systems, over in Europe and China, for example.

Just to get a simple answer would take a tremendous amount of effort and time, especially on the finance team's part, because we had to dig that information up manually, put it into spreadsheets, and then do more work and calculations to find the right answer. And then, again, because you have so much manual data digging or manual management, it creates room for errors. Sometimes you're not comparing apples to apples, so you get inconsistencies in the data.

This leads to frustration all around, from your stakeholders to the business leaders. It also leads to frustration from the finance employees and finance leaders just because of the time and effort.

So everyone's going to be on the same system, using the same processes. We've made sure that in all of our teams we've had a lot of our European representation. They have key input into the decisions as we design and configure the systems. But we are starting the rollout in North America first, and then we will roll it out to Europe. We're doing it by business unit. It will be starting with the business units that are more North America--centric first.

SP: With 150 finance employees around the globe, that's quite lean for a company of 8,000 employees. How do you keep it that way?

Rhinehart: Well, the Hackett benchmark study showed us that we weren't being as effective as we could be because we weren't doing the business partnering that we wanted to, but at the same time we were a very efficient and lean organization. They were actually amazed at how much we were able to get done with so few people. It's really just focusing on what you have to do. Unfortunately, this means that there are things that would be nice to do -- and that our business leaders and our stakeholders would like us to do -- that we just can't get to because we just don't have the people or the resources to do them.

This is why when we go through this transformation to an integrated single ERP system, I really don't see any reductions in the finance workforce. More so, I see reallocation and repositioning of activities as we become more efficient and more effective. The team will have the tools to get the transactions done quicker, more effectively, more efficiently. Now they can spend more time on the business partnering, the analytics, and driving the business.

SP: Has there been any push to actually add staff back into finance to do more of this partnering activity?

Rhinehart: I would say yes and no. In the tough economic environment that we are faced with, it really is not the time to add head count. Yet, we remain focused on ensuring that we have the appropriate resources allocated across the organization, while balancing our priorities and ensuring that we not only meet but exceed our customers' needs and expectations.

SP: I understand that you're responsible for supply chain as well. This is often an area that I use to illustrate where the optimum answer might be to add more people. Because purchasing personnel manage large spending amounts, a little improvement could have an impact far greater than the related salaries ...

Rhinehart: Absolutely. We have talked quite a bit about that with our supply chain organization. And in finance too, frankly, one of our lessons learned during this whole transformation is that we probably started out focusing too much on the business partnership and were trying to move too quickly down that path without having all of the tools.

We found this out at the expense of some of the fundamentals, and it was at the expense of controllership. So we have had to pull back a little bit and say that until we actually have the tools and what it takes in order to be the true business partners, you cannot be business partners and sacrifice your fundamentals and sacrifice your controllership.

SP: Could you explain a little bit about how you found this out and what you had to do to correct it?

Rhinehart: Well, we started seeing more errors and more prior-period surprises. It's not that they were material to us (or to our parent company, Berkshire Hathaway), but little surprises that, well, might not always stay little. These were surprises that clearly would not have come up in the past if you had a finance leader at a plant or in a business really focused on the accounting, the fundamentals, and the controllership.

SP: For the people in finance who moved on into bigger and better roles, what kind of things did you do that helped to enhance their skill sets and helped them to become more valuable to your organization?

Rhinehart: First, we enhance skills by giving people as many different experiences and assignments as possible. Give them a breadth of experience and get them involved and engaged in many different things. Push them beyond their comfort zone.

One key thing I've tried to do with the organization is to move people around from corporate to business or from business to corporate, and also between different businesses. I've tried very hard not to let people get people stuck in the same job forever, but instead to give them a variety of different assignments, really challenge them, and get them involved with other things.

I think that a lot of people have been pleasantly surprised at how much they grow by being challenged and taking on different assignments that they never thought that they could do or that they would ever have an interest in. For example, a finance analyst in one business could be completely different if they went to another business.

I currently oversee the company's global finance function, including accounting, treasury, tax, corporate governance, and business development. I also serve as the company's head of global supply chain, overseeing work with Johns Manville's suppliers, vendors, and business partners. Since joining JM in 1979, I have served as CFO, corporate treasurer, vice president of human resources, compensation and benefits leader, and vice president and general manager of a business unit.

SP: In other words, you've had some operating roles there as well ...

Rhinehart: Yes. And I've done quite a bit of mergers and acquisitions as well as divestitures. So all of those different assignments and experiences I've had, even if they were just special projects, were very valuable to me and added to my skill set and making me a more valuable asset to the company. I encourage all of my finance and supply chain people to try new things, and I try to mentor people across the company, not just in finance and supply chain. I encourage this as much as possible because it's for the benefit of the individual and for the benefit of the company as well, because, again, the people become greater assets.

SP: You are a little unusual, Mary, in that as a CFO you basically have worked for this company exclusively. You're a good example of how you can grow up within a company, but looking at all these different jobs, you certainly didn't do the same thing over and over ...

Rhinehart: That's right. I've had plenty of opportunities. I could have jumped for titles, I could have jumped for money, but it's more about the whole balance and what's important to you, and feeling that you really belong in an organization that you can really contribute to and have a lasting impact on. And if you move between organizations every couple of years, I really question how much of an impact you can really have in such a short period of time. How can you really fully understand the business and fully understand the customers and what drives the customers and therefore your business and product?

SP: How do you get your employees to buy into that vision? How do you get the rest of the company to buy into letting you have that seat at the operational and strategic decision-making table?

Rhinehart: Well, I think that you have to show them the value. You can't just ask for it. Recently, for example, I went with our senior leaders to visit a customer. I was at the table, and I was doing part of the presentation, and you just take on the role that you're in and you show your value. Then they understand the importance and they ask for it and they encourage it.
I can't emphasize enough that you have to go beyond your own comfort zone or beyond your own individual task or role or assignment. You make your role as big as you want it to be.